DETROIT — Buoyed by $680 million in new contracts, Walbro Automotive Corp. and the heads of two minority-owned plastics companies have formed a joint venture to make fuel tanks at a blow molding plant near downtown Detroit.
The project will include a new, 150,000-square-foot facility scheduled to open by July. The plant, which will cost an estimated $50 million to build, will be capable of making as many as 800,000 multilayer fuel tanks per year at capacity. The joint venture, known as Vitec, anticipates sales of $136 million for its first fiscal year, officials said.
The partnership between Walbro, one of the world's largest fuel-system suppliers, and two prominent minority business owners was spearheaded by General Motors Corp. and Chrysler Corp. officials. The automakers will provide guaranteed, five-year supply contracts, worth a total of $680 million, to make the tanks and other fuel-system components. The parts will be used on new models launched in 1999 and beyond.
The automakers awarded those contracts after learning Walbro's joint venture would have minority involvement, said Walbro Chief Executive Officer Lambert Althaver at a plant groundbreaking ceremony Oct. 30 in Detroit.
``We definitely are getting business [through Vitec] that we wouldn't have gotten otherwise on our own,'' Althaver said. ``The interest of GM and Chrysler picked up when we told them the company would be controlled by minority owners. That's good for the automakers, who want to work with more minority suppliers, and it opens up new business for us with GM.''
GM, Chrysler and Ford Motor Co. all have asked their Tier 1 suppliers to work more closely with minority-owned companies, partly to help them reach new segments of the car-buying marketplace. Harold Kutner, GM's vice president of worldwide purchasing, has mandated that Tier 1 suppliers do 5 percent of their business with minority-owned companies. Kutner spoke at the Vitec groundbreaking ceremony.
Walbro, which works more extensively with Chrysler than with GM, approached GM about supporting Vitec before proceeding on the idea, Althaver said. After getting GM's commitment, Chrysler also came on board with new contracts, he added.
The venture represents the first with minority co-owners for the fuel-tank supplier, which bases its automotive offices in Auburn Hills, Mich.
``This should help open doors at GM,'' Althaver said. Carmakers ``are reducing the number of suppliers that they deal with. But they're also leaving it up to [Tier 1 companies] to continue to work with minority suppliers.''
The venture, which started in October 1996, is composed of Walbro and businessmen William Pickard and Lawrence Crawford. Pickard serves as chairman and chief executive officer of Regal Plastics Co., an injection molder in Roseville, Mich., while Crawford is majority owner of Saginaw Plastics Inc. in Saginaw, Mich.
Although specific terms were not disclosed, Pickard and Crawford together hold a majority interest in the venture, Crawford said. Regal, an injection molder, is considered one of the largest minority-owned auto suppliers, with more than $36 million in annual sales. Saginaw Plastics is a smaller-sized, minority-owned blow molder recording about $3 million in yearly sales.
The plant will employ about 100 when it first opens, with plans to increase to as many as 350 people as business grows.
The Empowerment Zone location allowed Vitec to receive $13.6 million in federal tax credits from the Michigan Economic Growth Authority. The company also will be awarded federal tax relief and special grants and loans.
Initial production volumes will be close to 300,000 tanks produced per year, Althaver said. The six-layer, coextruded tanks include two outer layers of high density polyethylene, an inner shell of reground HDPE, a barrier of ethylene vinyl alcohol that prevents permeation and two adhesive skins buffering the EVOH layer.
The molding and assembly plant also will make other components for fuel storage and delivery, including fuel reservoirs, pumps, level sensors and emission control valves. Completed systems will be sent directly to GM and Chrysler plants in North America.
The facility will initially use two Krupp Kautex double-shuttle coextrusion machines. That number will expand as business warrants, Althaver said. The plant is located on a 10-acre site in southwest Detroit that once was home to a long-abandoned GM Cadillac assembly plant.
The project could be just the start of other ventures between Tier 1 suppliers and minority-owned companies, Crawford said. He added that he is keeping his eyes open for opportunities.
In another recent move, Troy, Mich.-based Manchester Plastics Inc. formed a joint venture in September with minority-owned Mexican Industries of Detroit to make instrument panels at another Detroit Empowerment Zone site.
``This is really the tip of the iceberg,'' Crawford said. ``We think of the [Vitec plant] as a model of how a minority supplier can achieve success and get involved in a community. The message has already reached the highest levels at GM, Ford and Chrysler.''
Besides the Vitec venture, Walbro is completing work on a new, 150,000-square-foot fuel-tank plant in Meriden, Conn., and a 60,000-square-foot facility in Ossian, Ind., Althaver said.
In addition, the supplier has just received a contract to provide some of the first coextruded fuel tanks produced in Europe, he said. The tanks, which will be made at the company's new Lokeren, Belgium, plant, will supply the Netherlands-based Nedecar, a venture of Volvo Car Corp. and Mitsubishi Motors Corp. Traditionally, European fuel tanks have been made of monolayer construction.